Pharmaceutical fraud involves activities that result in false claims to insurers or programs such as Medicare in the United States or equivalent state programs for financial gain to a pharmaceutical company. There are several different schemes used to defraud the

health care system Health, according to the World Health Organization, is "a state of complete physical, Mental health, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World H ...

which are particular to the pharmaceutical industry. These include: Good Manufacturing Practice (GMP) Violations, Off Label Marketing, Best Price Fraud, CME Fraud, Medicaid Price Reporting, and Manufactured Compound Drugs. Examples of fraud cases include the

GlaxoSmithKline GSK plc, formerly GlaxoSmithKline plc, is a British multinational pharmaceutical and biotechnology company with global headquarters in London, England. Established in 2000 by a merger of Glaxo Wellcome and SmithKline Beecham. GSK is the ten ...

$3 billion settlement,

Pfizer Pfizer Inc. ( ) is an American multinational pharmaceutical and biotechnology corporation headquartered on 42nd Street in Manhattan, New York City. The company was established in 1849 in New York by two German entrepreneurs, Charles Pfizer ...

$2.3 billion settlement, and

Merck Merck refers primarily to the German Merck family and three companies founded by the family, including: * the Merck Group, a German chemical, pharmaceutical and life sciences company founded in 1668 ** Merck Serono (known as EMD Serono in the Unite ...

$650 million settlement. Damages from fraud can be recovered by use of the

False Claims Act The False Claims Act (FCA), also called the "Lincoln Law", is an American federal law that imposes liability on persons and companies (typically federal contractors) who defraud governmental programs. It is the federal government's primary litigat ...

, most commonly under the ''

qui tam In common law, a writ of ''qui tam'' is a writ through which private individuals who assist a prosecution can receive for themselves all or part of the damages or financial penalties recovered by the government as a result of the prosecution. Its ...

'' provisions which rewards an individual for being a "

whistleblower A whistleblower (also written as whistle-blower or whistle blower) is a person, often an employee, who reveals information about activity within a private or public organization that is deemed illegal, immoral, illicit, unsafe or fraudulent. Whi ...

", or

relator (law) Relator , female relatrix , (Latin for "narrator") is the legal term meaning a private person at whose relation or on whose behalf an application for a quo warranto or mandamus is filed.A Dictionary of Modern Legal Usage. Copyright (c) 1990 Bryan A ...

Types of fraud

There are several different schemes used to defraud the

which are particular to the pharmaceutical industry. *Good Manufacturing Practice (GMP) Violations *Off Label Marketing *Best Price Fraud *CME Fraud *Medicaid Price Reporting *Manufactured Compound Drugs

GMP violations

Involve fraud with the Good Manufacturing Practice (GMP) Regulations which require manufacturers to have adequately equipped manufacturing facilities, adequately trained personnel, stringent control over the manufacturing process, appropriate laboratory controls, complete and accurate records, reports, appropriate finished product examination, and so on. Certain violations of the Good Manufacturing Practice Regulations may be the basis for a False Claims Act lawsuit.

Off-label marketing

Though physicians may prescribe drugs for off-label usage known as off-label marketing, the

Food and Drug Administration The United States Food and Drug Administration (FDA or US FDA) is a List of United States federal agencies, federal agency of the United States Department of Health and Human Services, Department of Health and Human Services. The FDA is respon ...

(FDA) prohibits drug manufacturers from marketing or promoting a drug for a use that the FDA has not approved. A manufacturer illegally “misbrands” a drug if the drug's labeling includes information about its unapproved uses. A drug is deemed misbranded unless its labeling bears adequate directions for use. The courts have agreed with the FDA that the

Food, Drug, and Cosmetic Act The United States Federal Food, Drug, and Cosmetic Act (abbreviated as FFDCA, FDCA, or FD&C) is a set of laws passed by the United States Congress in 1938 giving authority to the U.S. Food and Drug Administration (FDA) to oversee the safety of f ...

(FDCA) requires information not only on how a product is to be used (e.g., dosage and administration), but also on all the intended uses of the product. In 2004, whistleblower David Franklin prevailed in a suit under the

against Warner-Lambert, resulting in a $430 million settlement in the Franklin v. Parke-Davis case. It was the first off-label promotion case successfully brought under the False Claims Act in U.S. history. Oral statements and materials presented at industry-support scientific and educational activities may provide evidence of a product's intended use. If these statements or materials promote a use that is inconsistent with the product's approved labeling, the product is misbranded under the FDCA for failure to bear labeling with adequate directions for all intended uses.

Best price fraud

A figure reported by the manufacturer to CMS in quarterly reports under the Medicaid Rebate Program, it is used to calculate the Medicaid reimbursement rate. It is defined as the lowest price available to any wholesaler, retailer, provider, health maintenance organization (HMO), nonprofit entity, or the government. BP excludes prices to the Indian Health Service (IHS), Department of Veterans Affairs (DVA), Department of Defense (DOD), the Public Health Service (PHS), 340B covered entities, Federal Supply Schedule (FSS), state pharmaceutical assistance programs, depot prices, and nominal pricing. BP includes cash discounts and free goods that are contingent upon purchase, volume discounts, and rebates. The fraud occurs as the manufacturer falsely self-reports its Best Price.

Medicaid price reporting

In order to decrease the amounts owed to states under the

Medicaid Drug Rebate Program The Medicaid Drug Rebate Program is a program in the United States that was created by the Omnibus Budget Reconciliation Act of 1990 (OBRA'90). The program establishes mandatory rebates that drug manufacturers must pay state Medicaid agencies relat ...

, some companies misrepresented material facts regarding the regulatory origin/status of their brand name drugs, the AMP, and/or the best price. Despite the Government's good faith reliance to charge manufacturers a unit rebate amount based upon the manufacturer's own representation of drug status, and price, some manufacturers have deceptively and fraudulently, breached their duty to deal honestly with the Government.

Manufactured compound drugs

FDA guidelines authorize pharmacists to “compound” or mix medications only in response to a physician's valid prescription. This assumes, of course, that the physician intends that the medication be compounded. The regulations further require that the mixed or compounded medications are medically necessary and not commercially available. Illegal compounding includes compounding of ingredients such that the compounded drug is tantamount to commercially available medications, involving mass manufacturing of drugs under the guise of compounding. Federal law, including the Centers for Medicare and Medicaid Services (CMS) guidelines and the regulations of other Government Healthcare Programs, prohibit coverage of claims for “compounded” medications when the claims are submitted by a company that is mass manufacturing large amounts of unapproved drugs in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), under the guise of “compounding.”

Kickbacks

Kickbacks A kickback is a form of negotiated bribery in which a commission is paid to the bribe-taker in exchange for services rendered. Generally speaking, the remuneration (money, goods, or services handed over) is negotiated ahead of time. The kickbac ...

are rewards such as cash, jewelry, free vacations, corporate sponsored retreats, or other lavish gifts used to entice medical professionals into using specific medical services. This could be a small cash kickback for the use of an MRI when not required, or a lavish doctor/patient retreat that is funded by a pharmaceutical company to entice the prescription and use of a particular drug. People engaging in this type of fraud are also subject to the federal Anti-Kickback statute.

Examples of fraud cases

*$3 billion GSK settlement. On 2 July 2012,

pleaded guilty to criminal charges and agreed to a $3 billion settlement of the largest health-care fraud case in the U.S. and the largest payment by a drug company. The settlement is related to the company's illegal promotion of prescription drugs, its failure to report safety data,

bribing Bribery is the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official, or other person, in charge of a public or legal duty. With regard to governmental operations, essentially, bribery is "Corr ...

doctors, and promoting medicines for uses for which they were not licensed. The drugs involved were

Paxil Paroxetine, sold under the brand names Paxil and Seroxat among others, is an antidepressant of the selective serotonin reuptake inhibitor (SSRI) class. It is used to treat major depressive disorder, obsessive-compulsive disorder, panic disorder, ...

Wellbutrin Bupropion, sold under the brand names Wellbutrin and Zyban among others, is an atypical antidepressant primarily used to treat major depressive disorder and to support smoking cessation. It is also popular as an add-on medication in the case ...

, Advair,

Lamictal Lamotrigine, sold under the brand name Lamictal among others, is a medication used to treat epilepsy and stabilize mood in bipolar disorder. For epilepsy, this includes focal seizures, tonic-clonic seizures, and seizures in Lennox-Gastaut sy ...

, and

Zofran Ondansetron, sold under the brand name Zofran among others, is a medication used to prevent nausea and vomiting caused by cancer chemotherapy, radiation therapy, or surgery. It is also effective for treating gastroenteritis. It can be given by m ...

for off-label, non-covered uses. Those and the drugs

Imitrex Sumatriptan, sold commonly under brand names Imitrex and Treximet among others, is a medication used to treat migraine headaches and cluster headaches. It is taken orally, intranasally, or by subcutaneous injection. Therapeutic effects gen ...

Lotronex Alosetron, sold under the brand name Lotronex among others, is a 5-HT3 antagonist used for the management of severe diarrhea-predominant irritable bowel syndrome (IBS) in females only. It was patented in 1987 and approved for medical use in 2 ...

, Flovent, and

Valtrex Valaciclovir, also spelled valacyclovir, is an antiviral medication used to treat outbreaks of herpes simplex or herpes zoster (shingles). It is also used to prevent cytomegalovirus following a kidney transplant in high risk cases. It is taken ...

were involved in the kickback scheme. The government investigation of GSK was launched largely on the basis of information provided by four whistleblowers who filed two

(whistleblower) lawsuits against the company under the False Claims Act. GSK settled the whistleblowers’ lawsuits for a total of $1.017 billion out of the $3 billion settlement, the largest civil False Claims Act settlement to date. *Pfizer $2.3 billion settlement: Pfizer settled multiple civil and criminal allegations for $2.3 billion in the largest case of pharmaceutical and health care fraud in US history. The drugs involved were

Bextra Valdecoxib is a nonsteroidal anti-inflammatory drug (NSAID) used in the treatment of osteoarthritis, rheumatoid arthritis, and painful menstruation and menstrual symptoms. It is a selective cyclooxygenase-2 inhibitor. It was patented in 1995. ...

(an anti-inflammatory drug),

Geodon Ziprasidone, sold under the brand name Geodon among others, is an atypical antipsychotic used to treat schizophrenia and bipolar disorder. It may be used by mouth and by injection into a muscle (IM). The IM form may be used for acute agitation ...

(an anti-psychotic drug),

Lipitor Atorvastatin is a statin medication used to prevent cardiovascular disease in those at high risk and to treat abnormal lipid levels. For the prevention of cardiovascular disease, statins are a first-line treatment. It is taken by mouth. Common ...

(a cholesterol drug),

Norvasc Amlodipine, sold under the brand name Norvasc among others, is a calcium channel blocker medication used to treat high blood pressure and coronary artery disease. It is taken by mouth. Common side effects include swelling, feeling tired, ab ...

(anti-hypertensive drug),

Viagra Sildenafil, sold under the brand name Viagra, among others, is a medication used to treat erectile dysfunction and pulmonary arterial hypertension. It is unclear if it is effective for treating sexual dysfunction in women. It is taken by ...

(erectile dysfunction), Zithromax (antibiotic),

Zyrtec Cetirizine, sold under the brand name Zyrtec among others, is a second-generation antihistamine used to treat allergic rhinitis (hay fever), dermatitis, and urticaria (hives). It is taken by mouth. Effects generally begin within thirty minutes a ...

(antihistamine),

Zyvox Linezolid is an antibiotic used for the treatment of infections caused by Gram-positive bacteria that are resistant to other antibiotics. Linezolid is active against most Gram-positive bacteria that cause disease, including streptococci, v ...

(an antibiotic), Lyrica (an anti-epileptic drug),

Relpax Eletriptan, sold under the brand name Relpax and used in the form of eletriptan hydrobromide, is a second generation triptan medication intended for treatment of migraine headaches. It is used as an abortive medication, blocking a migraine att ...

(anti-migraine drug), Celebrex (anti-inflammatory drug), and

Depo-provera Medroxyprogesterone acetate (MPA), also known as depot medroxyprogesterone acetate (DMPA) in injectable form and sold under the brand name Depo-Provera among others, is a hormonal medication of the progestin type. It is used as a method of bi ...

(birth control). *Merck $650 million settlement: Merck settled a nominal pricing fraud case in which the company was accused of taking kickbacks and violating Medicaid best price regulations for various drugs. *United States et al., ex rel. Jim Conrad and Constance Conrad v. Forest Pharmaceuticals, Inc, et al. involved a drug manufacturer selling a drug, Levothroid, that had never been approved by the FDA. These allegations settled for $42.5 million due to multiple whistleblowers stepping forward to provide detailed information on the alleged fraud. The collective reward to the relators in this case was over $14.6 million.

References

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External links and resources

Masterminds Behind Pharmaceutical Fraud Deserve Prison Time
Consumer fraud Pharmaceutical industry Pharmaceuticals policy